Good morning! This week, MCCU had the
chance to sit down with a friend from CUNA Mutual Group, and talk
about how to save for retirement. She had a lot of good information, from
the amount you should put in, to the biggest mistakes people make when planning for retirement. It can be
easy to get off track when saving for retirement, but when you have some help,
and a set goal, it can be managed. Here are the highlights:
The 5 biggest mistakes people make with
their 401(k)
1.
Not having a set plan for retirement:
- Without
a plan, it is hard to know how much to save for the future. Having a goal about
how much you want to live off of is crucial for starting your investment in
your future.
2.
Making early withdrawals:
- Withdrawing from your 401(k) should be a last resort. When you withdrawal from your retirement savings, you cheat yourself out of already saved money, and the compound interest that comes with it. When you switch jobs, do not cash in your 401(k). Instead, transfer the money to your new job’s 401(k), or put it into an IRA (Individual Retirement Account).
3.
Taking out a loan:
- Borrowing
money from your retirement funds means you have taken money away from your
future self. If you miss a payment and are under the age of 59 ½. If the loan is not paid back in the allotted years, it is subject to penalties and income tax.
4.
Not diversifying, or diversify too little:
- Spreading
out your money means you have different rates and better chances of growing
your money. Putting all of your money into one investment is risky business.
5.
Not re-balancing your investments:
- Money changes over time, and if you don’t annually check your balances, your retirement plan may get off track. Make sure your money is where it will earn the most growth.
In any case, matching what
your employer puts into your 401(k) is a good idea, and may even be required.
You can always put a bigger percentage than what your employer does depending
on how much of your paycheck you’re willing to give up. In any
case, you need to be your own advocate for your retirement. Talk with a financial advisor to see how much you should be putting into your retirement fund based on when you want to retire.
"Time is key to building your financial
security."
--Suze Orman: author, financial advisor, motivational speaker
--Suze Orman: author, financial advisor, motivational speaker
